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Sun rises to profits challenge

Wall Street analysts remain sceptical

Despite lower than expected sales, Sun Microsystems still maintains that it will return to profitability this quarter.

The company is standing by predictions it made last month that its current fourth quarter, set to end on June 30, will be its first profitable quarter for a year.

Sun has had a run of four loss-making quarters, and was hit especially hard by the slump in IT spending.

Although the firm insisted that sales are where they were at the midpoint of its previous quarter, chief financial officer Michael Lehman said that it would not affect the company's profit projection for the quarter.

Despite reassurances of its first profit in a year, Sun failed to reassure Wall Street after saying that it would earn one cent a share on sales of $3.3bn in the ongoing quarter.

Both Goldman Sachs and Warburg Dillon Read lowered their quarterly revenue estimates for the company.

Sun's return to profit is viewed as something of a bellwether for the chances of wider technology investment.

"If Sun fails to make a profit this quarter it will have a big effect on the company and the market," said Gartner Dataquest analyst Charles Smulders.

But Smulders maintained that the real issue will be whether Sun manages to put together not just one but a string of profitable quarters.

The company is already thought to be benefiting from recent cost cutting measures. Earlier in the quarter Sun announced that it will shed about 1,000 workers by the end of the year, adding to the 4,000 cuts announced in November.

"Sun has clearly undergone restructuring and layoffs to help it streamline its operations to match the current business economic conditions," said Smulders.